Private Placements

With our help, you will be able to raise substantial capital without the hassles of SEC registration. Please read on to learn more about private placements and the services we offer.

What is a private placement?

A private placement is the private sale of restricted securities to qualified buyers. These securities are equity shares or debt instruments, are not tradable on the open market, and are not registered with the Securities and Exchange Commission. You privately place securities by filing SEC Form D and supporting documents.

How can you benefit from a private placement?

Private placements are a cost-effective alternative for small businesses to acquire funding without resorting to an initial public offering. An equity or debt private placement saves time and money as you solicit capital from a limited number of investors. Private placements are useful for a young company that has not yet established itself. They appeal to a broad spectrum of investors and allow you avoid the expense of a public offering. Private placements do not require underwriters, so they are quicker and cost less. Additionally, private placements may be the only way for risky ventures or start-up firms to access capital.

With a private placement, you can select your investors that have compatible objectives. And unlike public stock offerings, you are not forced to give up your firm's private status.

The bottom line: private placement offerings are cheaper and less complicated than issuing publicly-traded securities.

How does a private placement work?

The SEC's Regulation D (Reg D) specifies how certain securities can invoke "safe-harbor" exemptions to avoid registration. Sections 504, 505, and 506 of Reg D describe these exemptions. These exemptions explain how to privately sell securities without registration by filing a number of Form D documents with the SEC. Our skill in preparing and filing these documents allows you to raise capital without going through the costly and slow SEC registration process.

Are you qualified to offer a private placement?

At PrivatePlacements.org, we expertly determine the optimal method to qualify exempt offerings. We will analyze your firm and select the proper exemption. The following is a summary of the Reg D exemptions offered by the SEC:

  • Section 504: Pertains to the Small Corporate Offering Registration, or SCOR. SCOR offers an exemption to private companies that receive no more than $1 million in any one year via the sale of stock. There are no limits on the number or types of investors and the stock can trade publically. It is not available in Delaware, Florida, Hawaii, or Nebraska.
  • Section 505: Permits a small firm to offer up to $5 million in stock during a one-year period to an unlimited number of investors, so long as no more than 35 of the investors are non-accredited. An accredited investor must have enough assets or income to make such an investment. The SEC specifies that individual investors must have either $1 million in assets or $200,000 in net annual personal income, while institutions must hold assets of at least $5 million. The securities exempted under Section 505 cannot be freely traded.
  • Section 506: Permits a company to offer an unlimited amount securities to any number of investors, provided that no more than 35 non-accredited investors. Section 506 investors must be sophisticated. The securities exempted under Section 506 cannot be freely traded. Privately-placed real estate deals are usually filed under this exemption.

Is it complicated assembling the information necessary for a private placement filing?

Quite! For example:

“The amount and type of financial and non-financial reporting required will vary depending on the size of the offering. Different requirements pertain to offerings up to $2 million, between $2 million and $7.5 million and above $7.5 million. Offerings of up to $2 million need disclosure of the type used by Item 310 of Regulation S-B. Those between $2 million and $7.5 million need distribution of the kind of information required in Part I of Registration Form SB-2. If Form SB-2 is not available (e.g., if the issuer is a reporting company), the company must provide the kind of information "required in Part I of a registration statement filed under the 33 Act on the form the issuer would be entitled to use." (For most companies this is Registration Form S-1.) Companies offering more than $7.5 million worth of securities must supply information of the type specified in Part I of a registration statement.”

Don’t worry, PrivatePlacements.org understands this gobbledygook! Our senior legal team is conversant with all filing requirements. Bear in mind that only qualified professionals can assure management that a company's security sale will not create significant jeopardy for the company and its management.

What is contained in a Private Placement Memorandum?

A Private Placement Memorandum (PPM) is the most important part of an SEC Form D filing. It is a prospectus that discloses pertinent information about the offered securities to potential buyers, including the deal terms, allocation of funds, risks (company- and industry-based), and other material data.

The PPM is a dense document filled with highly technical material. The following is an abridged checklist of its contents:

  • Cover Page
  • Securities Legends
  • Suitability Standards for Investors
  • Summary of the Securities Offering
  • Risk Factors
  • Capitalization of the Company
  • Use of Proceeds from the Securities Offering
  • Dilution
  • Plan of Distribution of the Securities
  • Selected Financial Data
  • Analysis of Financial Condition and Results of Operation
  • The Business of the Company
  • Management and Compensation
  • Certain Transactions (transactions between the Company and its shareholders, officers, directors or affiliates)
  • Principal Shareholders
  • Terms of the Securities Offered
  • Description of Capital Stock of the Company
  • Tax Matters
  • Legal Matters
  • Experts
  • Documents Available for Inspection
  • Financial Statements
  • Projections
  • Exhibits

Don't feel that assembling all of this material is a good use of your time? We agree! PrivatePlacements.org does all the difficult work for you. Our long experience creating and filing PPMs allows you to concentrate on your business rather than on administrative details.

What can PrivatePlacements.org do for you?

PrivatePlacements.org One Stop Shop Program offers a full array of services to address all aspects of your private placements needs:

  1. We will consult with you about your financing needs and advise you as to your alternatives. This is essential because many of our competitors take a "one size fits all" approach to Private Placement Memoranda, using a generic template that is frequently noncompliant with SEC and/or state requirements. We tailor each offering on an individual basis, giving you a customized solution that complies with all related legal requirements.
  2. Our network of financial specialists to optimize the structure of you private placement deal, evaluating market demand, fees, pricing, liquidity, and risk sensitivity. We advise you on the mix of equity and debt obligations that are optimal for your offering. We help you frame the terms, rates, and fees of debt offerings. The resulting deal will maximize your return given current market constraints, and will satisfy the risk/reward requirements of investors. This is necessary because issuers often come back to the private placement market from time to time, and need to establish a reputation for fairness in order to successfully offer another private sale.
  3. You will meet a group of qualified potential investors, including hedge funds, private investor groups, and prime brokers.
  4. We provide website development services to help you sell your private securities to the qualified investor community via the Internet.
  5. We prepare the Form D legal documents you require, and file them with the SEC. PrivatePlacements.org will create and file the following documents:
    • Private Placement Memorandum – There are several different forms of the PPM. We always prepare Form 1A, which has the highest standard of disclosure to the SEC. We also make sure that all required exhibits are included, such as contract obligations, financial statements, and other important information. If the offering is debt, we also include data regarding the note structure and the promissory note provisions.
    • Subscription Agreement - a contract for the exchange of a specific face value of securities at a specific price. It includes an investor statement acknowledging the receipt and review of the PPM, assumption of risks, and suitability to invest in the securities.
    • Promissory Note Agreement – the terms of any debt that is to be privately sold.
    • Investor Questionnaires - information about the purchaser's background and business experience. The questionnaire shows that the investor is qualified to buy the securities and has sophisticated knowledge of the risks in doing so.
    • SEC Form D Federal Compliance Filing: - an 8-page SEC compliance filing, having instructions for completion of the filing, the filing timetable, and other pertinent information.
  6. We handle any state-required filings, including state blue-sky filings, (state statutes that detail the methods by which securities can be sold within the state). These statutes prohibit companies from offering securities unless the sale is registered with the state's securities commission or complies with one of the exemptions from registration specified by the state's blue-sky statute. Issuers must be certain that the sale will comply with the laws of the state in which the company is incorporated and in the states of residence for each offeree. Failure to comply with the requirements of applicable blue sky laws can create a substantial liability. PrivatePlacements.org ensures that our clients have complied with all relevant state laws.
  7. We offer any accounting, legal, and administrative services you will need. This gives smaller firms access to the same professional services provided to larger issuers. One example: many privately-placed stock certificates are to be stamped with a legend that identifies the stock as restricted. The legend states that the securities cannot be transferred unless pursuant to an effective registration statement or to an exemption from the registration requirements. The issuer should instruct its transfer agent not transfer the securities without the issuer's written approval. After a specified period of time, the securities become unrestricted, and the certificates must have the legends deleted so that they can be publically traded. Keeping track of the status of certificates and maintaining their proper labeling them is one of the many administrative services PrivatePlacements.org offers to the private placements community.

What about real estate deals?

PrivatePlacements.org prepares Real Estate PPMs under Regulation D Section 506. Any amount of principal is OK. This private placement vehicle is arranged as a capital pooling fund and allows investing in multiple projects simultaneously. Many real estate professionals use Real Estate PPMs to raise equity funding and then utilize the additional balance sheet assets to qualify for real estate loans.

How should you proceed?

Complete the PrivatePlacements.org information form and we will contact you right away. Our team is standing by to help you make your capital formation objectives a reality.

Get in touch with us for a free consultation